Postcards: The Secret Behind Record Oil Profits

Dear Old Friend,

I’m a bit behind today. It’s odd – the fact that it’s 3 pm in Switzerland as I write to you. I have been up for six hours, but I feel like I’ve only been active for 15 minutes. I need to get out of this house – as it’s our last day. I will be paying no attention to the markets on Monday. But I will be chatting away with the locals on the recent news out of Vienna, Austria. Isn’t that your plan today?

Saudi Arabia Cuts… and We Do Nothing

OPEC represents about 40% of global oil production. So, they’re the man behind the curtain in the world of supply. The largest member, Saudi Arabia, will cut production to roughly 9 million barrels per day to help provide price support. Ouch…

Lower oil production is a sign of expected economic weakness. U.S. producers have been reducing our rig count for months.

I’ve had a lot of spirited conversations about oil this week. And my two primary takeaways are these.

1) It is likely that Saudi wealth – the real generational wealth of that nation – is tied up with a few hedge funds and trading organizations that are struggling right now. And they are trying to support prices as best they can because this is in their personal economic interest. There’s nothing wrong with that – as this is the game within the game. It’s just another reminder of how little control we as individuals have over the situation.

2) To my progressive friends: oil companies did have record profits in the last year. But there’s a major factor that you haven’t considered: They’re not spending or expanding production due to the policies of this administration. It’s not gouging…

See you out there,A person with a skull on his arm Description automatically generated with medium confidence

Garrett Baldwin

Florida Republic Capital (Available on Substack)

 

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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